The demise of Redcar would raise doubts over whether the Teesside industry can survive. The region has been at the centre of British iron and steel production ever since industrial quantities of iron stone were first discovered in 1850 in the nearby Cleveland Hills.

The North East was an incubator for steel and iron magnates such as Sir Isaac Lowthian Bell, Sir Arthur John Dorman and Albert De Lande Long, who were behind the industry which underpinned Britain’s economic power in the late Victorian era.

By the late 1870s, Britain led the world in metal production, accounting for almost 50pc of pig iron output and 40pc of the world’s steel. But the subsequent gradual decline in the British steel industry accelerated after the privatisation of British Steel in the 1980s, when the Government refused to subsidise loss-making plants.

Chinese imports account for four times as much of UK steel as they did four years ago Photo: Bloomberg

Since its economy has started to cool, China has been infiltrating international markets with more of its low-cost offerings. Steel exports from China are said to have increased by 28pc to 43.5m tonnes in the first six months of this year, despite production falling by 2pc.

To survive, Chinese steel mills are now selling overseas at a loss in order to maintain their production lines and to empty overstocked warehouses.

Chinese imports were 2pc of UK steel demand in the first half of 2011, a figure expected to rise to 8pc this year. Britain’s steel makers also face headwinds from a strong pound, high energy costs, environmental levies and high business rates.

Compared with China, Britain is now a minnow in terms of steel production. Chinese mills have an installed capacity of 1.1bn tonnes of metal per year, of which 340m tonnes is excess capacity. China’s crude steel production accounts for more than half of the world’s total. Its overcapacity alone is more than double the European Union’s entire steel production of 170m tonnes.

Demand growth for steel in Europe is also expected to slow this year after it picked up in 2014 along with the volume of imports, which now account for the majority of the UK’s supply. Across Europe, steel demand growth is expected to slow to just 1.5pc this year, which will add to pressure on the industry across the region.

According to UK Steel, imports accounted for 60pc of market share last year – compared with 56pc in 2013 – as British manufacturers have struggled to retain market share. Tata Steel UK, which owns the giant Port Talbot and Scunthorpe plants, posted a pre-tax loss of £768m in the year to the end of March, compared with a £354m loss last year.

The European Commission is investigating claims that both China and Russia are dumping unwanted steel on to Western markets, pushing many European metal smelters to the brink of bankruptcy.

In June, 10 steel-making associations from across Europe and America issued a joint statement calling for action to stem the flow of Chinese metal.

“There is a strong consensus against the rising tide of exports from state-owned, supported or controlled steel industries,” said the statement. “Looming over all of this is China, whose massive and increasing overcapacity in an era of slowing growth has already destabilised the global steel market and trade flows.”

A man plays golf near the steel plant in Redcar, Teesside Photo: PA

Despite concerns over the strength of the global market for steel, the European Union saw a modest 3.9pc bounce in consumption last year. However, steel consumption remains around 25pc below the levels achieved in 2007 and doubts remain whether European states and institutions are willing to take on China in what could easily turn into a full-blown trade war to defend what many see as in industry in historical decline.

In a statement to The Daily Telegraph, Eurofer – the organisation that represents European steel producers – blamed China for causing the potential closure of Redcar.

Eurofer said: “Chinese import pressure and unfair trade practices are certainly [among] the root causes underlying the pressures that steel plants, such as Redcar, are facing. China now sells its excess steel to the EU market at prices that do not even cover its costs for raw materials and material transformation.”

According to Eurofer, anti-dumping duties already imposed by the European Commission are the only things protecting many of the existing 330,000 European steel industry jobs.

Eurofer wants China denied market economy status (MES), which Beijing argues it is entitled to under the terms of its agreement to join the World Trade Organisation in 2001. The organisation fears that granting China market economy status would make it far harder for Europe to impose tariffs on cheap Chinese goods.

Eurofer said: “At present, China does not meet the MES criteria, a view echoed not only by the steel industry but also by many other manufacturing sectors. Were MES to be granted under current China’s non-market economy conditions, EU anti-dumping measures would no longer be effective because the EU would no longer be able to find real dumping margins on the exports of its artificially low-priced, subsidised steel products.”

However, according to Mr Stace from UK Steel, it’s not just China that is to blame. The strength of the pound, which has appreciated especially against the euro over the past year, is making British steel exports uncompetitive in the European market and adding a potential £200m to the costs facing producers.

Although the Government has ruled out subsidies for Redcar, there is a £130m package of state aid measures that has been proposed to offset the cost of meeting pollution targets currently awaiting EU approval.

“The Government needs to secure state aid approval as soon as possible for the industry,” said Mr Stace.

Another handicap facing British producers is the high cost of energy. Chinese steel mills benefit from cheap domestically-produced metallurgical coal and do not have to meet tough air pollution standards due here by 2020.